When a committee of
M.Ps decides to admit that the lead financial regulator is about as much use to
the consumer as the FSA has proved to be, I think we are entitled to sit up and
take notice.

When talking about
the appointment of John Griffith-Jones as head of the new Financial Conduct
Authority, this is what the Committee has to say;

"...He must
restore the credibility of the conduct regulator..."

This is about as
basic a requirement for a regulator as one might realistically conceive, and
the fact that the Treasury Select Committee felt it necessary to spell out this
requirement in such a degree of granularity, identifies just how far down the
value chain the work of the FSA had sunk. This statement proves that the FSA
had managed to lose all its credibility, and in so doing, exposed the consumer
to every depredation that the financial sector was capable of foisting on them.
It means that the sector it was supposed to regulate merely despised them,
ignored them, went round them, and generally held them to be of no account, the
truth is, they were not frightened of them, and that is the trouble.

The Select
Committee's findings are scathing in their denunciation. Remember, this is a
Government committee and it is talking about an agency over which it held a
supervisory role. Normally, such committees tend to pull their punches and
water-down their criticisms, but not this time! The Summary of the report
continues;

"...The FCA is
the successor to a body which failed consumers. Although it devoted a great
deal of time and effort to conduct matters, it left consumers exposed to some
of the worst scandals in UK financial history..."

Well, there you have
it, the FSA failed consumers. How - was
it negligence, recklessness, or was it what I have long suspected, that it was
so far up itself, with its coterie of economic theoreticians and academics and
Big 4 consultants? I once conducted an interview with a former FSA staffer who
described the stultifying atmosphere inside the organisation, being run on the
worst examples of civil service lines. She talked about the employee attrition
rate and the enormous turn-over in staff, many of whom left after a short time
in post because of the sheer pettiness and inter-departmental squabbling. She
told me about new employees who came into the organisation with absolutely no
experience of financial matters, but who were put out to conduct financial
reviews at major banks within a matter of a few weeks of arrival.

I have observed with
my own eyes, and I have blogged on the sheer mind-boggling incompetence of so
many of the financial crime investigations which have been undertaken by the
financial crime staff. I have written on the lunacy of leaving such complex cases
to staff who have no previous knowledge or experience or obvious skill in
dealing with professional criminals, and I include in this group, those who
possess highly-attuned criminogenic characteristics.

I have previously
commented upon the dangers of employing people who possess civil or commercial
legal qualifications in positions where they will be required to deal with
criminals, and I have lamented the absence of anyone in the senior
decision-making process with former financial detective skills or experience.
They may employ some former police officers for all I know, but I never seem to
see their identifications in the investigative process. All too often, the
people who do get employed come from the same, predictable kind of background,
safe pairs of hands, 'one of us', never going to rock the boat!

As an aside, it amuses
me no end to read all the articles that are now being published about the need
to employ skilled compliance officers who can 'pro-actively' police the financial
market, having the ability to predict the areas of wrong-doing that are most
likely to be the preferred area of operation for the financial criminals, spivs
and wideboys.

Regular readers of
this blog will know that I have been calling for this facility for a very long
time, but my views and my advice have been repeatedly derided, and attacked. Suddenly,
all these ideas are now flavour of the month. Will anyone be willing to finally
employ me, do you think?

Turning back to the Select
Committee's criticisms, it states unequivocally, "... it left consumers
exposed to some of the worst scandals in UK financial history..."

I am still finding
it hard to get used to this uncompromising language! It is so unusual for a
Select Committee to speak in these terms, it must have been deeply angered by
the failures which it saw.

We have lived
through an era of financial criminality almost without precedent.

It is not as if
financial crime in the City was hitherto unknown, far from it. The con-man and
the crooked banker have been associated with the City from time immemorial. The
South Sea Bubble of 1720 was only a dot on the criminal timeline. I often show
my students a slide which reads;

"...Go where
you will, in business parts, or meet who you like of businessmen, it is - and
has been for the last three years - the same story and the same lament.
Dishonesty, untruth, and what may, in plain English, be termed mercantile
swindling within the limits of the law, exists on all sides and on every
quarter…"

It is a wonderful
quotation and it comes from a publication called "...Temple Bar Magazine...",
of 1866, although it could so easily have been used today!

However, what we
have experienced in the last few years on the watch of the Fantastically Supine
Apologists, dwarfs other financial criminality beyond peradventure.

The level of
downright criminal fraud associated with the PPI scandals alone is deeply
shocking, yet the FSA did nothing about bringing anyone to book for this orgy
of criminal dishonesty and deception. How they can have sat back and allowed
this exercise in criminal cheating (now said to probably reach in excess of £30
billion) to continue unpunished is simply beyond my comprehension, When
questioned about it in front of the Commission on Banking, Hector Sants, that
paragon of investigative zeal said words to the effect that; "...well we
asked them to stop, but they just ignored us. They used their lawyers to fight
us, and they wouldn't listen to us..."

Of course they did,
you damn fool, they were making too much money out of PPI to stop the gravy
train, just because you said so! They weren't frightened of you, and they knew
you wouldn't do anything, and they just carried on laughing at you.

The scandal with the
LIBOR manipulations is simply breathtaking. It was an open season for the spivs
and wideboys in the banks, to manipulate and fiddle the system for their own
benefit. It went on for some years, but when the chips were down, no-one in the
top jobs in the banks, UBS is a classic example, knew anything about it. In
front of the Banking Commission, UBS executives said, with a straight face,
that the first time they heard about the LIBOR excesses was when they read it in
the newspapers.

Hello, excuse me,
reality interlude time, please! When questioned by the Banking Commission,
super sleuth Tracy MacDermott opined that the investigative trail had petered
out before it reached the Executive level, so they didn't ever question the UBS
Executives about what they might have known about the LIBOR activities.

It wasn't that she
didn't have the powers to do so, it wasn't because she already knew the
answers, but, as she explained, they only interviewed those who were directly
involved. Ms McDermott, with her little trademark giggle, maintained that there
was '...no value in talking to people who can't help you...' that the people
being interviewed hadn't, as expected, sought to turn the responsibility on to
those above them...' so the trail of evidence petered out. Adopting a very
pious tone, Ms MacDermott lectured the Commission saying that they '...have to
go where the line of enquiry takes them...'

God help us! Here
she and her team were, with the opportunity to go and screw down three of the world's
major bankers about the activities of their bank in one of the biggest
financial scandals in history, and they just couldn't be bothered to find a
reason so to do. They could have given these bastards the biggest grilling of
their collective protected lives, they could have terrified the living daylights
out of them and probably got some serious information from them.

Instead, they just
couldn't be bothered. Was this negligence, or possibly even a reckless degree
of connivance? No, sadly it was neither of these, it was just basic ignorance,
of the powers that the Courts will permit to an investigator when serious
criminal wrong-doing is suspected. It was ignorance of their functions as
investigators, and ignorance of the methods and techniques that any experienced
detective would have used to achieve his ends. And that is the biggest sadness
of all!

What other gems did
the Select Committee choose to lay at the feet of the FSA?

The Committee accuses it of "...creating
a 'box-ticking' culture whose benefits were far from evident and which still
failed to pick up major failures in the making..."

This supine
box-ticking mentality was widely known in the banking industry, and their
entire compliance programme was aimed at meeting the needs of the FSA box
tickers, while ignoring the wider responsibilities of their role.

Box ticking is easy,
it is a cowardly way of operating because it avoids confrontation, and it is
the bully's way of operating. I have spoken to many compliance officers who
said that they knew it was no use seeking to discuss matters with their FSA
inspectors, because they were not interested in any answer, other than that
which ticked the box. You didn't tick the box, you were guilty. So, they
stopped engaging and just provided the box tickers with boxes to tick.

This isn't how to regulate,
but it's how you do it when too many of your staff are unskilled or
inexperienced, or have no knowledge of how to deal with the wiseguys!

Finally, and I
think, most crucially of all, the Select Committee is highly critical of the
FSA Board, of whom it states;

"...The board
of the FSA also appeared to fail in its oversight of the work of the Authority.
(John Griffith-Jones) and his new board colleagues will need to demonstrate
stronger strategic leadership than their FSA predecessors..."

The FSA Board is
made up, as you would expect, of the usual collection of the Great and the
Good. Nothing wrong in that you may well say, typical British tradition of
staffing Boards with good chaps (of both sexes), safe pairs of hands, people
who you only just have to look at their cv's and know "...yes, these
people are 'one of us' ..."

That's fine, and
under most normal circumstances, it wouldn't really matter very much. These
people will give you the value of their academic experience, and there can be
no doubt that you need their financial expertise, no doubt there will be plenty
of it.

But that's the
problem. These kind of people are fine when it comes to running an organisation
that is providing leadership for the kind of people who are pre-ordained to be
good, honest and upright citizens; who will not play fast and loose with the
rules, and can be guaranteed to comply with the regulations they operate under.

Such a Board exists
to lend tone and gravitas to the Authority's deliberations, to provide the odd
White Paper or Thought Leadership publication; perhaps stimulate a little
debate at a nice evening cocktail party to which a few tame MP's and a visiting
Euro bureaucrat are invited; possibly be a lead speaker at some grand
conference, or give a learned paper at one of our leading universities.

But ask them, just
once, to come up with some practical experience and advice and a cohesive
action plan on how to deal with a financial institution like Barclays Wealth,
where, as we were told only this week-end;

"...The
current leadership team have pursued a course of “revenue at all costs”, taken
a conscious decision to ignore support functions, reinforced a culture that is
high risk and actively hostile to compliance, and ruled with an iron fist to
remove any intervention from those who speak up in opposition..."

Ask them to suggest
a strategy for dealing with the people who created this atmosphere of anomie;
ask them to suggest an action plan for taking down the architects of this
dysfunctional organisation, but in a manner whereby any evidence you might want
to retain to show a judge later, can be collated and retained in an
uncontaminated manner so as not to render it inadmissible; how to undertake these actions in such a way
that the individuals concerned don't go shrieking off to lawyers, demanding
injunctions; and how to find the evidence to demonstrate that they are not fit
and proper persons to be having the control of a regulated public company, and
you will be barking up a blind alley!

The Board failed in
its oversight of the FSA's conduct because they had no-one on the Board who had
the first clue how to deal with the bunch of slick, amoral, greedy,
dysfunctional, criminogenic, Masters of the Universe/Big Swinging Dicks who
control the power functions inside our banking sector. I cannot help but wonder
whether the Board members have already tendered their collective resignations
in the light of these words.

We cannot be
criticised now for saying these things because they, and much worse are out in
the public domain. Senior executives have been forced to resign because of their
dishonourable actions, and the truth is out, the genie is out of the bottle.

That is why the
Select Committee has chosen its words carefully, the new Board must provide 'strategic
leadership', they need someone to be able to demonstrate strategy thinking, to
be able to figure pro-actively, to have an action-plan in the event that
another of these financial dinosaurs decides to run off at the groin in the
future.

I cannot impress
just how serious these criticisms are of a public body, which up until last
week apparently enjoyed the full confidence of Government. They are scathing in
their scope, and they are reputationally damaging in the extreme.

Finally, The worst
thing is that virtually all of the disgraced employees of the FSA will be
re-housed and re-employed in the new Financial Conduct Authority. Tracy
MacDermott is already the putative Director of Enforcement in the new Agency,
and no doubt many of her team will go with her!

Monday, January 21, 2013

In my last blog, I pondered whether
Andrew Jenkins could possible reform Barclays Bank. I suggested some new
principles by which he might operate in future.
Unhappily, I now realise I was wrong A major report published on Sunday 20th
January proves the depth of moral corruption and compliance-averse conduct
exercised by the Barclays Bank Wealth Division.

It describes the regime of fear
which was deliberately inculcated inside Barclays Wealth. It reports how the
boss, Andrew Tinney, lied and shredded evidence of a damning report in March
2011 which would expose the real state of affairs inside the Bank of bullying,
and how Intimidated staff were forced to deliberately ignore and flout regulatory
and compliance rules in pursuit of 'revenue at all costs'.

Such a report has issued a final
death blow to what little was left of Barclays otherwise appalling feral
reputation, and it means that Andrew Jennings' attempts to re-launch the bank, demonstrating a new 'ethical' profile,
adhering to all the public compliance norms, is not only doomed to fail, but
should be pre-empted, and the Barclays Wealth Division should be closed down as
being in the public interest.

Andrew Tinney resigned after it was
revealed that he covered up a report into Barclays Wealth's failings. He
secretly shredded a bombshell report that described a key part of the bank as
‘out of control’.

Andrew Tinney, who was chief
operating officer of the bank’s high-end private investment division, Barclays
Wealth, destroyed the explosive dossier after reading its shocking contents. He
then misled banking regulators and Barclays chief executive Antony Jenkins –
the man brought in to clean up the bank after the Libor rate-fixing scandal and
the resignation of Bob Diamond – by pretending that the report had never
existed. Tinney contributed to that state of affairs by shredding the only hard
copy and ensuring that its contents were not entered into the Barclays computer
system.

Apart from anything else, such
actions, on the part of a senior executive of the Bank are in direct
contravention of Section 172 of the Companies Act 2006, and even now, I cannot
understand why shareholders are not organising a litigation group action to sue
this man back to the Stone Age for breach of his fiduciary duties towards them.
I shall certainly watch the FSA's actions to see how they penalise Barclays for
these outrageous breaches of corporate governance and their responsibilities
towards their regulator.

This is what always infuriates me
about our financial regulatory approach. We have perfectly good laws in the UK
to regulate this kind of behaviour, but when they are breached, and it is the
banks who are involved, no-one in authority does anything about invoking the legal
powers to take action, instead they lie about their powers to act! We were lied
to by the FSA over PPI fraud, we were lied to by the FSA over money laundering
issues, we were lied to by the FSA about the relevant powers to deal with LIBOR
manipulation, all of which examples of
FSA mala fides have been identified in this blog! S.172 requires, inter alia, the
duty of a company officer to promote the success of the company.

Section 172 of the Companies Act
replaced a director’s duty to act “in good faith in the best interests of the
company” with a requirement that the director must act, in the
way he considers in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole. In doing so,
the director must have regard to the following factors:

• The likely consequences of any
decision in the long term.

• The interests of the company's
employees.

• The need to foster the company's
business relationships with suppliers, customers

and others.

• The impact of the company's
operations on the community and the environment.

• The desirability of the company maintaining
a reputation for
high standards of business conduct.

• The need to act fairly as between
the members of the company.

How Tinney could possibly have
thought that any of these objects would have been promoted by suppressing this
report is entirely beyond my comprehension, but it demonstrates the depth to
which his own personal standards of honesty, integrity, and moral commitment
had sunk, and further demonstrates beyond peradventure why he and his entire
coterie of managers and directors are not fit to have the control of a whelk
stall, never mind a public company.

I include his contemporaries in
this, because they would all have been aware that the report was being
compiled, and it is human nature that they would all have been aware of its
potential contents. In fact Tinney (who received a package worth around
£5 million a year in salary, bonus, share options and incentive payments) probably
took the fall to protect others, which is why I am saying that the combination
of a culture of dishonesty, moral bankruptcy and an integrity-free environment
make it clear that the company is too infected with the morality of the
back-alley thug, that place it well past redemption.

Tinney's announcement that he was
responsible for suppressing the report enabled Barclays to make an internal
announcement that he had resigned from his job last week. An internal
announcement, you notice, not a public one. So much for the new transparency at
Barclays that Jenkins was trumpeting!.

The report has exposed a culture of
fear, intimidation, bullying and mismanagement at the bank’s stockbroking and
investment arm, which is responsible for managing client assets worth
£184 billion.

This report has come at an acutely
embarrassing time for Barclays, as Anthony Jenkins now tries to regain public
trust after a series of deeply damaging scandals.

The suppressed report paints a
devastating picture of incompetence and arrogance at the bank, showing that
executives, among other wrongdoing;

Pursued a ‘revenue at all costs’
strategy.

Fostered a culture of fear and
intimidation.

Were ‘actively hostile’ to the idea
of compliance with banking rules.

Presided over a ‘broken culture’
where problems were ignored or buried.

Allowed the business to spin ‘out of
control’.

I have written and blogged repeatedly
of the criminogenic culture which exists within the investment banking arms of
global banks. These observations were not unique to Barclays.

I have advised the Regulators that
such a state of dysfunction existed, for many years. They have either derided
my observations or ignored my warnings.

This is why I have repeatedly said
that this banking culture is a clone of an organised criminal enterprise and needs
to be dealt with accordingly.

Part of the problem is that the
Barclays own Godfather, Roberto 'the Diamond Geezer' Diamante, brought other
Americans into the operation, men who believed that they knew how to manage
better than anyone else, (the 'What can the Brits teach us that we don't
already know' mentality), and who inculcated an atmosphere of fear and intimidation, refusing to countenance
any opposition to their style of managerial control.

I have worked for two major American
corporations and in my experience, bullying and intimidation is the sine qua
non of some managers' style. Many American managers try hard to achieve
consensus and to encourage their teams to think strategically, but some,
particularly those who have worked in Wall Street and the City of London, are
little more than a bunch of over-bearing braggarts and bullies. It grows out of
the US lack of any employment-protection legislation, and means that these
managers can get away with their dysfunctional behaviour and their rule of terror
because no-one dare challenge them for fear of being sacked on the spot. This
does not mean that many British managers are any better!

Again, this culture has become
endemic at Barclays Wealth, and it will not be easily eradicated. It generates
an environment where no-one is encouraged to make decisions or to feel
empowered to think laterally, because of the all-embracing 'blame culture' that
exists within the organisation. Again, for this reason, reform of the entity is
now beyond hope, and a complete dismantling of the organisation must now be the
preferred option.

Consider these quotations from the
Report, and question whether this institution is fit to be allowed to continue
in operation.

"...The current leadership team have
pursued a course of “revenue at all costs”, taken a conscious decision to
ignore support functions, reinforced a culture that is high risk and actively
hostile to compliance, and ruled with an iron fist to remove any intervention
from those who speak up in opposition..."

"...Management consciously
failed to invest in necessary technology, people and safeguards that it knew
it needed, leaving these areas understaffed, under-skilled, under-supported and
in disarray..."

"...A conscious choice was made
to ignore compliance until an issue was raised by the regulators – actively
inviting intervention. There has been a total lack of accountability by the
senior team..."

"...Management have created a
culture of dominance and fear that has removed escalation of issues [the
reporting of concerns up the management chain] and created a siloed
organisation with serious flaws. Issues do not flow up but are buried, stopping
any solution ever coming to light..."

"...This culture immediately
removes anyone who opposes the managing director Mitch Cox and his team or who
expresses dissent in any way… and prevents any counterbalance to the “revenue
at all costs” strategy..."

One banker stated; ‘When I reported
a compliance issue to a member of the management committee, I was told, “I
don’t have time for this bullshit.’ Another said: ‘When we presented the risk
report, an executive said “This is a piece of shit” – and threw it across the
room.”’

One senior manager is accused in the
report of being ‘incredibly defensive’ and of failing to take regulatory issues
seriously. Another executive is said to have been determined to stop the
inquiry team from gathering information. This individual, the report says, was
regarded by colleagues as a ‘key contributor to the current culture of fear’.

"...The senior team
portray themselves as all-powerful and all-knowing… and people chose to
disagree with them at their own peril. It is a mentality of superiority which,
when combined with other deficiencies, stops the team from tackling their blind
spots. When those deficiencies are in compliance, this results in serious
issues that no one else has the power to address.."

"...Stories
circulate of individuals who have been fired because they brought issues to the
management’s attention. It is culturally acceptable at BWA, from the top of the
organisation down, to ignore, put off, and even deride risk and compliance
issues..."

So, when taken as a
whole, it becomes clear that Barclays Wealth is a financial entity long since
past it's sell-by date. There is no excuse for the kind of behaviour and
overbearing conduct which was sanctioned and condoned inside the operation, and
it must now be closed down in the public interest.

When you come to review
the findings in the report, you quickly realise that the authors were talking
about an institution which had sunk into a state of profound anomie, a
dysfunctional, normless state of regulatory limbo, a kind of suspended ethical
animation, where normal conduct, regulatory compliance, honest behaviour, moral
insightfulness, all had been turned on their head, to satisfy the over-inflated
egos and over-paid men who ran the operation.

Institutions like this
have not achieved this status overnight. The rot was allowed to set in many
years ago, and it was encouraged to flourish and grow by an ad-mixture, of obscene
over-payments, the advancement of psychotic personalities, the promotion of rule-breaking
and other improper behaviour, the wholesale disregard for the rule of law and contempt
for the regulatory regime. Anyone still working in this environment is
compromised, their compliance officers tainted beyond hope of redemption, and
their systems damaged beyond repair. You don't reform entities such as this,
you recognise that like the rabid animal they have become, they need to be
humanely destroyed, in order to cleanse the wider industry and to expunge their
infected influence.

It must be observed that
their continued existence owes as much of its provenance to the failings of the
FSA as the lead regulator to identify severe failings in the structure,
management and overall conduct of business by the Barclays Wealth personnel.
Rogue institutions can only continue to conduct their illegal business when
those supposed to regulate their activities, are either wilfully blind to their
activities, or are too incompetent to see what is going on under their noses.

It may become necessary
to re-visit the motives and decisions taken by Andrew Jenkins to employ Hector
Sants as his new 'Head of Ethical Compliance' . Sants was in charge at the FSA
throughout this era of dysfunction. He should be called to account for his
failures to identify this criminogenic environment. The Parliamentary
Commission on Banking Standards should consider calling him back as a matter of
some urgency, if they want to retain a semblance of being thought to be a
serious attempt to review banking practice.

More and more examples
of appalling conduct and juvenile behaviour among Barclays' staff are being
published.

These stories will
continue to circulate, and they all add ammunition to the arguments of those
who now say, 'enough is enough', shut this monster down!

We have reached the
stage where we have to realise that by allowing these disgusting entities to
continue in business, that we are being failed by a Government which wants to
feather-bed the banks at all possible opportunities. If we want to see a
climate of ethical conduct, fair dealings and the highest possible level of regulatory
'best practice' being identified in our banking sector, it would be in
everyone's best interests if Barclays Wealth were to be placed into compulsory
liquidation, "...pour discourager les autres..!"

Friday, January 18, 2013

I have heard it
reported that you have told the bank's 140,000
employees to sign up to a new code of conduct, or leave.

This is a very brave act on your part, albeit far too little and
far too late, but better than nothing. For far too long, you all laboured under
the malign influence of Don Roberto, who focused you all on short-term gains to
the greater detriment of your longer term ambitions, you clients, your values,
and ultimately, your reputation. For 20 years Barclays manifested an increasingly aggressive
work culture, which, I am now told, you recognise as focusing too much on
making a quick buck instead of upholding the values and long-term reputation of
the bank.

Why didn't you say all
this when the Godfather was at the helm? Was it politically not expedient? Why
didn't you stand up in front of the Board and put it to them that they were
behaving like a second-rate loan sharking enterprise? You could have done so,
although I wouldn't have given a brass razoo for your chances of keeping your
job very long. How much money did you earn in bonuses for staying shtum all
those years, you can probably begin to see why I am not all that impressed by
your Damascene conversion to the straight and narrow all of a sudden!

Your Private Banking arm
was so bent that a friend of mine who was briefly head of anti-money
laundering, left, because as he put it, he wanted to get back to knowing how it
felt to sleep at night.

Between you all, and you were part of the management structure
at the time, let us not forget that, you took a once-proud and major bank, and
you trashed it. Bob, 'The Capo' Diamond had to quit over Barclays' role in
rigging the Libor rate used in trillions of pounds of financial contracts. You
were just the first of several international banks to be implicated in this
particular scandal, and you were fined a total £290m by US and UK regulators.
You got off cheap!

Worse still, you,
along with most of the other major UK High Street lenders, has also been found
culpable in recent years of defrauding large numbers of your customers by
cheating them with unnecessary payment protection insurance to mortgage
borrowers, and overly complex, over-priced interest rate and currency hedges to
small businesses.

You have now got some
very hard miles to cover to bring your institution back to where the public
will trust it once again.

I am told that your requirements are that staff now sign up to five key
values - respect, integrity, service, excellence and stewardship.

These are
fine-sounding ambitions, Mr Jenkins, but what do they mean in an institution
such as yours which has rejected all respect it may have held for its
customers; lost any integrity it might once have possessed; failed repeatedly
to give good service to its clients; forgotten the meaning of what it means to
provide excellence; and failed to demonstrate anything remotely like
stewardship for years.

I have bitter
experience of the way you treated your customers, I used to be a client of
yours, and I would never, repeat never, willingly renew that relationship.

I am told that these
demands of yours come at the same time as staff prepare to learn what bonuses
they will receive for their services in 2012, and that bonuses in future will be
assessed against the new "Purpose and Values" criteria.

In my judgement you
have already failed my first test of true sincerity. What bonuses are you
intending to pay this year? What have any of you done to deserve any bonus
payments. Bonuses are supposed to reflect good work, added value, integrity, going
the extra mile.

What has 2012
signalled for Barclays? Fines for LIBOR rigging, Fines in the US for
electricity market pricing fiddling, I mean how much more criminality are you
willing to condone before you decide not to reward it with bonuses. There are
hundreds of thousands of hard working men and women in this country, many of
them your customers, God help them, whose salaries have been pegged, cut back,
frozen and who have not seen an increase for some time. Their costs of living
are going up, their children are facing massive debts for university education,
something you would have got for free, their elderly parents are wondering
whether this Government of your friends are going to remove their winter fuel
allowances, and their bus passes, and you are talking about paying bonuses to
your organised criminal employees! Have you lost your entire sense of
proportion, man!

I know you have been
talking tough to some of your crooks and spivs, telling them "There might
be some of you who don't feel they can fully buy in to an approach which so
squarely links performance to the upholding of our values."

I guess you thought it
sounded messianic when you said, "My message to those people is simple:
Barclays is not the place for you. The rules have changed. You won't feel
comfortable at Barclays and, to be frank, we won't feel comfortable with you as
colleagues."

Well, you are going to
have to prove that you can walk the walk as well as just talking the talk. You
failed another test of integrity when you appointed Hector Sants, former boss
of the Fantastically Supine Apologists, to head the new Barclays' compliance
department.

I don't quite know
what you think that ' great big soppy old Hector' is going to do for your new
image, he was asleep on his watch at the FSA, or so the Parliamentary Select
Committee found, and you then went and rewarded him with some massive pay deal.
No doubt he will be part of the new package which you are reported as saying would "excite" the workforce.

So, as part of my
message to you, I thought I might send you some good ideas with which to
underwrite your new squeaky-clean image.

First, get together
with your Department Heads, and your HR department, and demand to be given a
list of all the highest earning staff members in terms of bonuses and commissions,
and then get rid of them, fast.

These are the people
who will have been causing you most of your problems in terms of cutting
corners, cheating the rule book, ignoring the regulations, rigging LIBOR, etc,
etc. By sacking them, you will send a very loud message to the rest of the
teams that you really mean what you say about starting the way you mean to go
on, and it will have a salutary effect. Most of these really high-earners are
routinely loathed by their peers who see them as cheats and liars who are being
allowed to prosper.

Remember, most people
like working in an ethical environment. I know I know, after all these years of
working for the most crooked bank in the High Street, to suddenly learn that
the vast majority of staff like working in an ethical workplace must come as
something of a shock, but it is true!

Next; buy in some
top-notch training in ethics, integrity, honesty and commercial morality and
insist that every employee from yourself, down to the office cat attends. Don't
give this project to one of the BIG Four consultancies, bring in someone from
outside who really specialises in proper ethics consulting.

While on the topic of
the Big 4, radically curtail the amount of money you spend on them, because in
most cases they are not part of your solution, they are part of your problem.
You should be capable of employing good staff who have the necessary experience
to be able to deal with most of these issues without having to spend the amount of money you do on
the Big 4. They are a waste of time and space and they cost you a fortune. They
are in the business of consolidating so many of your bad practices and bad
habits, and you can get by without them. If you doubt this wisdom, read an
incredible book entitled, 'Dangerous Company' by James O'Shea and Charles
Madigan and realise why you don't need to spend the money these people cost
you.

When it comes to
recruiting staff, stop spending money on recruitment agencies, they are another
parasite industry who are draining you of revenue. They employ young people
straight out of university to engage in a box-ticking exercise when it comes to
recruiting staff. Do it yourself, that's what your HR division is for.

Pay particular
attention to the quality of your compliance and Anti-Money Laundering teams, and make sure you hire the very best
people you can. Pay them well, and understand the value of age and experience.
Don't rely on loads of wet-behind-the-ears kids who are paid peanuts, but who
become another box to be ticked by the regulator. Hire quality and experience,
and stop being so ageist! Just because someone is over 55 doesn't mean they
have forgotten all they ever knew. Pay a premium for skills and experience, and
look for grey haired people who can offer proper mentoring for young people,
helping keep them off the crooked path.

Remember, managing
people is like herding cats. Every single person is different, so make sure you
reward common traits. Reward honesty, integrity, and adherence to best
practice, and watch very carefully for signs of the 'star performer'.

Rigidly demonstrate a
commitment to an anti-bullying program in the workplace. Bullying is one of the
most commonly corrosive and damaging influences in the workplace these days. Instigate
a programme of in-house training to encourage staff members to identify
bullying, and help stamp it out internally. The same goes for sexism, racism
and any other kind of exclusionary behaviour.

In your trading rooms,
make sure you discourage any signs of sexist conduct against staff. Do not be
willing to condone 'laddish' behaviour which all too often is aimed at ambitious
women, seeking to destroy and undermine their effectiveness and efficiency.
Stamp out any such behaviour ruthlessly.

Encourage regular
medical examinations for signs of excessive drink or drug abuse. Too much money
has been lost because the trader or broker bolstered his pathetic ego with a
snort of Colombian marching powder or a drink too many. Make drink and drug
testing in the dealing rooms the same as if these staff were Olympic athletes.
They are supposed to be the best in the market, or so you repeatedly tell us,
so treat them as such and make sure they are not short-changing you.

Encourage staff to
obtain additional educational qualifications through part-time study,
day-release, night school, etc, and reward it. You are allowing them to add
value to their personal work-life balance, you are encouraging them to educate
themselves to acquire higher skills and knowledge and they will reward you for
this commitment. In addition, encourage staff to undertake meaningful voluntary
work in the local community, whether working with children who have reading
difficulties, or helping old people who need extra assistance. Whatever the
model, make sure it is recognised as being part of the firm's ethic and ensure
it is suitably rewarded.

Make bonuses mean
something. Instead of dishing out hundreds of thousands of pounds, all of which
merely encourage staff to adopt the shortest of short-term policies, pay fair,
but small bonuses, no more than a couple of thousand pounds at the most, and
only then for real evidence of integrity, ethical or honest conduct. In this
way, staff will not need to behave in unethical or illegal ways, just to guarantee
getting their bonuses.

Finally, make sure
that the legal compliance requirements of the lead regulator are implemented
properly and in their entirety. Encourage a dialogue with both the regulator
and the criminal intelligence services who rely on suspicious financial disclosures,
and enter into gateway agreements with them to ensure that the rules on
compliance and money laundering are being adhered to. Share your experiences
with them, and stop the present atmosphere of distrust and contempt from
growing.

If you can do these
things Mr Jenkins, you might just have half a chance of succeeding. For my
money, I remain to be convinced. Leopards and spots comes to mind all too
easily.

Sunday, January 13, 2013

It is somewhat ironic that on the day when the latest
findings of the criminal excesses of RBS are announced, H.M.Treasury should have
just published its latest volume of collected wisdom in a document entitled "...Anti-Money
Laundering and Counter Terrorist Finance Report 2011-12..."

Reading this document, you would be forgiven for thinking
that H.M.Government actually means to do something serious about dealing with
money laundering. The language of the Executive Summary contains all the portentous
warnings you might expect from a properly concerned agency of control, but when
you begin to deconstruct the messages, you begin to realise what a complete bunch
of mendacious clowns we now have in Government, because these provisions really
mean that even less notice is going to be taken of the Money Laundering
Regulations and laws than heretofore.

I say this because the British Government habitually
demonstrates that it is not in the least concerned about the realities of this
problem. They will talk about it, but If you were to ask the Prime Minister or
members of his cabinet what the banks will do about the new money laundering
proposals, they would airily observe that the banks will of course do
everything in their power to comply with the law. They would say this because I
suspect they believe it, and they believe it because they really are that
stupid.

They are happy to go along with the fiction that the
banks generally, will obey these laws, because to think anything else leaves
them in a very vulnerable position indeed. If they were to suspect that the
banks had no intention of complying with them, they would have to do something
about it, so better to fall in line with the convenient fiction, and state that
all is for the best in the best of all possible worlds! So, as a result, we get
these pompous proposals being issued by Government, but living as they do in a
fantasy la-la world of their own making, they do not understand that the banks
have absolutely no intention of implementing these regulations, just as they
have not properly implemented the AML regulations in the past.

This is part of the problem we face in the aftermath of
the financial scandals of recent times. We have a Government that believes
largely what the banks tell it, because too many of the friends of those in
positions of power, are in banking and financial services. It is a natural Tory
stamping ground, indeed many Tory M.Ps have dabbled in investment banking prior
to entering Parliament. We are being very badly served by this present
administration because too many of them are too willing to give a lot of
support and credence to these criminal banking organisations.

They are only too
willing to protect their vested interests and those of their friends, because
they find it impossible to perceive that the banks are a major criminal
enterprise. To do so would undermine all their preconceptions about themselves,
their class and their place in society, so bank reform doesn’t figure very
highly on their list of priorities.

So, I thought I would review the Executive Summary of the
new Treasury report to see what we can glean from its contents, comparing what
the Mandarins want us to believe, and what the words really mean so we can evaluate
its effective value. Try this for size!

"...The effectiveness of supervision to
prevent money laundering and terrorist financing has never been so important.
The range of threats the UK and other countries face continues to grow...”

Well so far so good, so why is it that the existing money
laundering rules are so poorly regulated and banking failures to maintain a
good compliance profile, prosecuted so rarely? What standard of effective supervision
has the FSA applied in the last ten years, bearing in mind its importance as a
Supervisor? It’s all very well the Treasury going on about the need for good
supervision, but when the lead regulator is so poor at ensuring that its
responsibilities are met, what is the point?

These are driven by the use of new
technologies designed for illicit purposes and a range of actors who engage in
illicit activity, including money laundering, terrorist financing,
circumvention of sanctions and tax evasion.

This paragraph starts with the usual piece of bullshit
padding to make it sound like HMT are on top of the job, but it's all pure
puffery, because they never specify what they think they mean. They never
specify because they don’t know, but they think it is enough to spell out scare
stories! What new banking technologies designed for illicit purposes? Spell it
out if you have such information, but don't make up stuff like this as if you
were some tabloid scandal rag, it demeans you! The latter part is correct, but
hang on, isn't Mr Cameron and his little sidekick, Mr Osborne keen on other
people's foreign tax evasion? Don't they do everything they can to make foreign
funny money feel as much at home, as possible in the UK? How else do you
explain the number of non-domiciled ex-pats, Russian oligarchs, East European
‘biznizmenii’, many of whom are wanted in their home countries for fraud, crime
and state looting, as well as a host of other wealthy tax exiles who want to
make London their home? They are not coming to the UK to start businesses and
create jobs, they are coming here to shelter their tax evasion and to hide
their criminally-acquired wealth.

As for terrorist financing, well, Afghan terrorist money
leaks in and out of the UK at will, thanks to Pakistani corporate exchange
control failures, and the willingness of British banks based in the Gulf
States, as well as in London, to ignore international laws on money laundering
and openly launder as much as much funny money as they can lay their dirty
criminous hands on. We have already seen how little HSBC were concerned when
laundering drug money from Mexico, or how much notice Standard Chartered Bank
took of US sanctions. They took a long hard look at the risks and went for the
‘business as usual’ route!

All the banks who have recently been fined for money
laundering, whether foreign drug money, the proceeds of foreign sanctions
busting, or moving the proceeds of their own criminality such as LIBOR fixing
or PPI fraud, were acting openly and with full knowledge of their criminal
actions. It is an unacceptable piece of
pretty piety to say that these were mistaken activities which were not
intended, when they were clearly fully intended, and executed quite deliberately.

Many countries, including the UK, now have a
high level of technical compliance with the global standards, set by the
Financial Action Task Force (FATF). The focus now needs to shift to ensuring
the investment made by governments, supervisors and businesses is used
effectively to prevent, detect and disrupt these threats.

Can this be really true, or is this just another piece of
spin blurb? What on earth is meant by ‘technical compliance?’ The UK banking
sector doesn't give a fig about international money laundering compliance. It
may have implemented systems and controls which give the impression of a
semblance of ‘best practice’ compliance, but the reality of the compliance
level is that it fits where it touches at best.

My experiences of banks and their compliance personnel is
that they are only going through the most superficial of motions. We saw the
paucity of compliance professionalism in the court hearings of the HSBC –v-
Shah case, The banks’ attitude towards AML compliance is exemplified in the
findings of the FSA in their high-level report of June 2011. Such Suspicious Transaction Reports that are
made are little more than a lottery, too many disclosures being made on the
basis of a defensive posture, but without any real thought or scientific
approach being given to the contents.

The banks have absolutely no desire to work in
partnership with police or other law enforcement agencies. At a recent City dinner
at which I spoke on the issues of AML rules, the overwhelming response from the
delegates, all of whom were senior AML Executives from the major banks, was one
of total contempt for the actions and workings of law enforcement.

One banker commented, “...we keep asking them to help us
regarding those people whom we suspect of defrauding us, but they can’t seem to
do anything. Why should we bother to send them any information about our
clients...”

It did not seem to be clear to this Jerk that the police
are not a free adjunct and a tax-payer funded part of his bank's fraud
prevention mechanism, and that his risks were for him to manage, but his words
enjoyed a lot of support. When I pointed out that these requirements were part
of a legal process which they were legally compelled to comply with, the same
banker’s answer was;

“...Fuck ‘em, who is going to enforce the law in these
cases. How do they know whether what we send them is any use to them, I am not
going to spend money employing a lot of staff to get engaged in all this
disclosure analysis, it’s a complete waste of time and money...”

These attitudes were widely shared, as far as most of the
major banks present were concerned, money laundering compliance is a total
waste of scarce resources and is therefore simply ignored, in the wider scheme
of things.

They rest content that the likelihood of the FSA doing
anything about this paucity of compliance is negligible! The FSA proposals for
closer regulation by the FCA are still awaiting implementation, but in the
absence of any meaningful prosecutions for wilful failure to comply with the
rules, they will fall into abeyance like all the rest. Themed reviews don't
prevent money laundering!

Supervisors
and businesses must work together to ensure resources are focused on the small
percentage of transactions that present the highest risk and not on the
majority of transactions, which are likely to be quite legitimate. This risk-based
approach has now been further embedded by the FATF into the revised and
strengthened global standards.

Ah yes, the much-trumpeted ‘risk-based approach’. Allow
me to assure you that the RBA is a form of words which roughly translated means
‘doing as little as feasibly possible’! It means that regulated banks and other
firms who are subject to global AML standards will now spend even less time on
engaging with AML issues, reporting, disclosures, analysis, et all, because they
can always argue that they are adopting a RBA, and they have perceived no
risks! The RBA is the ‘get out of jail card’ for the lazy and incompetent, and
criminous, and means that even less AML compliance will be observed than
before. This is borne out by the next paragraph in the Executive Summary which
reads;

Businesses
should feel confident to use their risk analysis skills to make informed
judgments about where risks lie and what action they should take to mitigate
them. Supervisors should support businesses in this.

In other words, don’t worry too much about compliance, we
are tasking your supervisors not to give you too hard a time! Then however,
concerned that the message might have become a little too laissez faire, the
next paragraphs of the Summary sounds a warning;

Equally,
businesses should expect robust supervision and severe penalties, where
appropriate, from law enforcement agencies if found to have failed to consider
and act on the risks they face in business. The consequences of such failures
have included the significant reputational damage rightly suffered by firms as
a result of enforcement action. Not only do such failures impact upon those
firms, they reflect badly on the reputation of London as a financial centre.

The
impact on the City and the UK from such failures, in addition to other recent
scandals, should not be underestimated. It is vital that supervisors and
businesses work together to protect the reputation, integrity and
competitiveness of the UK.

HM
Treasury will maintain a focus on the effectiveness of supervision, in
particular, for improving transparency and accountability. We will do this by
continuing to work closely with the full range of supervisors, including
Government departments and professional bodies.

These latter paragraphs are an intellectually dishonest
form of words which meet the needs of the Treasury’s requirements to publicise
these new provisions, while using the language of responsibility and legality.

In reality, they mean nothing, nor are they intended to.
If the UK Government was really worried about the reputation of the London
financial market, they would have taken a lot more trouble over ensuring that
the banks in the City could not have behaved in this way.

They did not do so, but now they do not have the
integrity or the will to hold the banks to account and make them pay for their crimes.
The effect of this failure is to have turned the banks into an enemy within!

On paper, we have a legal regime designed to prevent and
forestall money laundering. It is a global standard of legal best practice and
it is underwritten by all the signatories to the FAFT concordat, of which the
UK is one such. As part of that legal structure, the banks are required to act
in partnership with the law enforcement agencies, to report and disclose
transactions which they suspect are the proceeds of criminal conduct.

The banks have been given legal protections from civil
suit at the hand of their clients for complying with these rules, and as they
stand, they are frankly not an unreasonable set of standards, and designed to
help, prevent and forestall international organised crime, including drug
trafficking.

There is absolutely nothing preventing the banks from
complying with these rules to the fullest and most proper extent. The only
thing that causes them to draw back from this co-partnership requirement is
their conditioning and their criminogenic culture which informs them that to
share such information with law enforcement would be to work against their
commercial interests and minimise their likelihood of making profits.

Let us be very clear. The banks do not care one iota
about the possibility of likelihood that they might be handling the proceeds of
criminal money. This, they will say, is not their concern, they are nor detectives
or law enforcement agencies, let the police deal with those issues, but let us
get on with the business of making money.

Trying to make the banks willing co-partners in the anti
money laundering campaign has been an abject failure, one which we should have
recognised all along. They are the most two-faced, hypocritical, perfidious
group of individuals who will talk the language of best-practice compliance to
regulators and government agencies, while in private they will cut the budgets
for AML compliance to the bone, and only recruit those people who are going to
knuckle their foreheads and do as they are told, which is not to ask any
awkward questions. This is why they have to be forced to comply, and forced to undertake remedial exercises, spending money they do not want to spend.

When the banks are openly committing the level of crimes
they have been guilty of in the recent past, when they are providing full
service bank facilities for the Mexican drug cartels, when they are manipulating
the LIBOR market, defrauding their clients in a wholesale manner, laundering
sanctioned money in direct confrontation of the laws, then they have become the
target for police action and focus. Interpol, Europol, SOCA, and the other
agencies of investigation should now be positively targeting these bastards,
with a view to using the most powerful legal weapons to prosecute and convict
them!

They are no longer just making a few mistakes, they are
an organised criminal enterprise in their own right. They are worse than the Mexican
Cartels, the Cosa Nostra, the criminal gangs from Asia, the Russian Vory, they
are worse because they are state-sponsored criminals, legitimised by their governments
and underwritten by their tax-payers.

We must lobby to force Governments to understand that
these enterprises are beyond the reach of reason, and that they must be brought
down. The demise of a few criminal banks will not cause the collapse of Western
capitalism, it will strengthen it in the longer term, and the time has come to
see these mafioso locked away behind bars for as long as it takes.

Just in case you might have overlooked some of the offences
these criminal gangs have committed recently, and the fines they have paid, refresh your memory with these.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!